The ongoing Covid pandemic affected the market, both higher and lower, in June. In our last market commentary, we said the probability of a short term pull back was very high and just a few days after our commentary was posted, from June 8th until June 11th, the DOW Jones dropped nearly 9%, and then again from June 23rd to June 26th, the DOW Jones dropped about 5% (Source: https://finance.yahoo.com/quote/%5EDJI/history?p=%5EDJI). In both cases, the market recovered eventually and ended the month with a slight gain, but it was a wild ride. We’re still quite a bit ahead of the DOW in our in-house managed portfolios year to date but we were slightly negative for the month because of the volatility.
When you take a step back and look at the social unrest, spiking Coronavirus numbers in many states, and a corporate earnings season approaching that will almost certainly be dreadful, you’d think the market would be in a tailspin downward. The Federal Reserve has been committed to Quantitative Easing (QE) for about 3 months now. QE was last used during the financial crisis in 2009. The simplest description is that the Federal Reserve prints money and then buys stocks and bonds with it. This helps to provide stability to the markets, because you have a constant buyer coming in. Because of this, by many measures, this is once again the most overvalued market in 80 years. Corporate earnings have dropped because of the shutdowns related to Covid, so Profit/Earnings (P/E) ratios are dangerously high. Stocks are not a good value by historical standards, but that doesn’t mean they cannot keep going up, so we’re continuing to digest that.
Our portfolios are currently set to own more stock relative to the past few months because our research said a short term surge up was very likely and we wanted to take advantage of it. We ended the month very strong because of this. However, in the coming weeks, Wall Street companies will share their Covid altered earnings numbers for the second quarter. Because of this, the probability of a short-term pullback has increased dramatically in the next month or two once again, and we hope to sell a portion of our stocks for a nice profit very soon. With the election coming up soon, that may add volatility as well.
You trust us with your retirement savings, and we believe riding markets up and down as much as 10% in a single day is not what you signed up for. A big mistake can be the difference between retiring early or working extra years. It can be the difference between running out of money before end-of-life and the long term care costs that come with it, or keeping your pride, dignity and not being a burden to your family. We will continue to be patient as we navigate this “once in a hundred year” pandemic. We managed the financial crisis in 2007-2009 extremely well and we plan to navigate this difficult time as well with patience and prudence, and so far our experience is paying off.
If you have any questions about taxes, your individual investment portfolio, our 401(k) recommendation service, or anything else in general, please give our office a call at (586) 226-2100. Feel free to forward this commentary to a friend, family member, or co-worker. If they would like to receive this commentary in the future, please send us an e-mail at firstname.lastname@example.org at your earliest convenience. If you have had any changes to your income, job, family, health insurance, risk tolerance, or your overall financial situation, please give us a call so we can discuss it.
Thank you for your confidence and referrals!
Bob, Ken, Jim, and Zach
Summit Financial Consulting
Since 2000, China’s economy has roughly quadrupled in size, but its debt has increased by a factor of twenty-four. Source: -Zeihan.com, May 15, 2020
With global call centers closed, Americans only received 2.9 billion robocalls in April which is down from 4.8 billion in February. -PRNewswire, May 6, 2020
Because of the stay-at-home order, California highway police say that overall traffic levels are down 35% from last year. However, the number of speeding tickets for driving faster than 100 mph has increased 87%, with one motorist caught doing 165 mph. Source: -Los Angeles Times, April 22, 2020
At least 89 coronavirus vaccines are under development around the world, with seven now in human trials. Pfizer says that if its vaccine proves safe and effective, it might be available on a limited basis as early as September. The most quickly developed anti-viral vaccine to date was the one for mumps, licensed in 1967 after four years of research. Source: -International Business Times, April 30, 2020
Colleges in the United States earn roughly $600 billion per year- equivalent to the combined annual revenue of the tech firms Google, Apple, Microsoft, Facebook, Netflix, and Twitter. -The Wall Street Journal, June 18, 2020
Last month, Elon Musk, who takes no salary from Tesla, earned a performance payout worth roughly $775 million. Musk received 1.7 million Tesla shares to bump his ownership stake up to 20.8%. Source: -CNBC, May 28, 2020
After going public last week, the peak market value of the little-known electric-truck startup Nikola Corp was $30 billion- higher than Ford’s valuation of roughly $24 billion. Nikola has yet to sell any vehicles. Source: -The Wall Street Journal, June 9, 2020
There are roughly 91,000 dams in the United States and in 2025, 70% of those dams will be more than 50 years old, and currently, 8,000 are over 90 years old. -National Geographic, May 27, 2020
Disclosures regarding our performance reporting: Because some clients are in the 10% tax bracket and others are in the 37% Federal tax bracket, we have decided to report performance before taxes. If you have a non-qualified account, please feel free to contact us to determine your individualized rate of return after tax. All of Summit’s performance is after our 1.25% advisory fee that is deducted monthly. Your fees may be higher or lower depending upon the amount of assets invested with our firm. Feel free to contact us to receive online access so you can see your personalized rate of return. The Aggregate bond index we use is ticker: AGG. All dividends and distributions are reinvested and included in the performance. The S&P 500 index quoted above does not include dividends within the performance. If a holding within our portfolio does pay a dividend or other income, it is reinvested, so our performance does include dividends. This report has been prepared from data believed reliable, but no representation is made as to accuracy or completeness. Total return and principal value will vary depending upon the deduction of advisory fees, brokerage commissions, reinvestment of dividends and other earnings or fund charges. This information is provided to you in combined form, solely for your convenience and ease of review and is not an offer or solicitation to buy or sell any securities. In order to verify that all account values and transactions are accurate, we encourage you to compare the information provided in our statement with the statement you receive directly from your custodian. All written content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Past performance does not guarantee future results.